Wednesday, February 20, 2019

Hey ‘Big Spender’


China is proving to be a big spender in London after results highlighted that Chinese firms spent $46.8bn buying foreign companies last year.

The report comes as Hong Kong retail sales fell in January to their lowest level in 12 years following an 80% drop in tourists. This has led to a decrease in business rental rates in Hong Kong, as Savills Estate Agents confirmed that shop rentals had fallen by 8.5% year on year in 2014.

Companies in China have also suffered from China‘s economy, with Prada‘s 28% net profit fall last year being put down to its difficulties abroad, particularly in China. The company‘s Asian sales fell by 3%, with Prada confirming that the Hong Kong and Macau markets affected its performance.

Instead, Chinese companies are looking to the UK to fully capitalise throughout Hong Kong‘s economic difficulties. One investor reaping the benefits of focusing on a foreign market, is Chinese carmaker Geely. The taxi company and car manufacturer has announced that it will invest £250m in its new Midlands plant, expanding its vehicle production from 2,000 to 36,000 a year.

Chinese investors will also benefit from the launch of the yuan money market fund, which will mark the currency as influential. British finance officials were positive about the move citing:

“We see it as one of the most important financial developments in a century. We think that obviously, China‘s economy is the second largest in the world and it will become the largest”.

The yuan money market fund comes as no surprise after Chinese firms invested such large amounts in UK businesses last year – 10 times the amount it inputted a decade ago. UBS‘ head of M&A in Europe, the Middle East and Africa said “European mergers and acquisitions are up 10% on the year so far in deal value, but in Asia it is up 40%, coming close to an all-time high.”

The increase of Asian funding is assisting European markets and the opening of Chinese markets globally through Alibaba, which hopes to boost the economy in Hong Kong. Towards the start of March a spokeswoman for the e-tailer spoke on Amazon joining its marketplace, “We welcome Amazon to the Alibaba ecosystem and their presence will further broaden the selection of products and elevate the shopping experience for Chinese consumers on Tmall”.